This Water Purchase Agreement involves
Title: WATER RIGHTS LEASE AND WATER PIPELINE EASEMENT AGREEMENT
Law Firm: Jackson Walker
After Recording, Return To:
Crown Mines, L.L.C.
P. O. Box 743547
Dallas, Texas 75374-3547
WATER RIGHTS LEASE AND
WATER PIPELINE EASEMENT AGREEMENT
This Water Right Lease and Water Pipeline Easement Agreement (“Agreement”) is entered into between CROWN MINES, L.L.C., a Texas limited liability company, with an address of P. O. Box 743547, Dallas, Texas 75374-3547 (“Crown Mines”), and DEER TRAIL MINING COMPANY, L.L.C. , a Nevada limited liability company, with an address of 8880 Rio San Diego Drive, 8 th Floor, San Diego, California 92108 (“DTMC”) this 30 th day of July , 2007 (“Effective Date”). Crown Mines and DTMC may be referred to herein individually as a “Party” and collectively as the “Parties.”
Crown Mines has been the owner of Water Right No. 63-37, being more particularly described as having a maximum flow of 0.25 cubic feet per second and a maximum annual diversion of 180.995 acre feet of water from Three Mile Spring for year-round mining purposes at the Deer Trail Mine and Mill Site situated in Piute County, State of Utah (the “Spring Right”).
Water from the Spring Right is conveyed via a pipeline approximately 7,510 feet long located on an associated right-of-way extending from Three Mile Spring to the Deer Trail Mine and Mill Site (“Three Mile Spring Pipeline”).
Concurrently with the Effective Date, Crown Mines has conveyed a fifty percent portion of the Spring Right to DTMC, said portion being more particularly described as having a maximum flow of 0.125 cubic feet per second and a maximum annual diversion of 90.5 acre feet of water from Three Mile Spring for year-round mining purposes.
Concurrently with the Effective Date, Crown Mines has retained a fifty percent portion of the Spring Right, said portion being more particularly described as having a maximum flow of 0.125 cubic feet per second and a maximum annual diversion of 90.5 acre feet of water from Three Mile Spring for year-round mining purposes (the “Retained Right”).
Crown Mines also owns a contractual right to use water diverted under Water Right No. 63-3043 as evidenced and described in the Agreement between Cottonwood Irrigation Company and Deer Trail Development Corporation, dated July 28, 1977 (the “Contractual Right”), a copy of which is attached to this Agreement as Exhibit A .
Concurrently with the Effective Date, crown Mines has assigned a fifty percent portion of its Contractual Right to DTMC.
Concurrently with the Effective Date, Crown Mines has retained a fifty percent portion of the Contractual Right (the “Retained Contractual Right”). The Retained Right and the Retained Contractual Right are referred to collective herein as the “Water Rights.”
Concurrently with the Effective Date, Crown Mines conveyed to DTMC certain patented and unpatented mining claims and mill sites and dumps situated in Piute County, State of Utah, described in the attached Exhibit B (the “Claims”).
DTMC desires to use the Water Rights and Three Mile Spring Pipeline in its operation of the Claims through a lease of the Water Rights and Three Mile Spring Pipeline from Crown Mines.
Crown Mines desires to acquire a perpetual non-exclusive Pipeline Easement over and across the Claims for construction of a future pipeline for the transportation of water.
NOW, THEREFORE, in consideration of their mutual covenants and promises described herein, including, but not limited to, the perpetual non-exclusive Pipeline Easement described herein, the Parties agree as follows:
Recordation of Agreement . This Agreement may be recorded by a Party with any governmental agency, including in the offices of the County Recorder of Piute County, Utah, and Sevier County, Utah.
Lease of Water Right and Pipeline . Crown Mines hereby leases the Water Rights and the use of the Three Mile Spring Pipeline to DTMC for purposes consistent with the approved uses of the Water Rights (the “Lease”).
Term . The term of the Lease is five (5) years from the Effective Date, unless earlier terminated or extended as provided herein.
Extension of Lease . DTMC may provide written notice to Crown Mines of its desire to extend the term of the Lease for successive periods of up to five (5) years each. DTMC shall provide notice to Crown Mines of its desire to extend the term of the Lease at least 6 months prior to the end of the term or any extension thereof. Crown Mines shall extend the term of the Lease as requested by DTMC, provided that: (i) Crown Mines has determined, in its sole and absolute discretion but exercising reasonable commercial judgment, that the Water Rights are not required for operation and development of any of its mining claims or for other uses which may by law be permitted during the period of extension requested by DTMC; and (ii) the Parties have negotiated additional terms, including a price for the lease of the Water Rights, as Crown Mines may have determined to be appropriate, in its sole and absolute discretion but exercising reasonable commercial judgment, for the period of extension requested by DTMC. In the event that Crown Mines determines that the Water Rights are necessary for operation and development of its mining claims or for other uses which may by law be permitted, Crown Mines shall so
notify DTMC in writing no later than 4 months prior to the end of the term or any extension thereof.
Rent . The Water Rights shall be leased to DTMC at no cost during the initial term of the Lease. The Parties shall negotiate in good faith the rental for the Water Rights for each period during which the Lease is proposed to be extended.
Duty to Use Water . DTMC shall divert and fully use the water available under the Water Rights consistent with their approved uses. Within 120 days of the Effective Date, DTMC shall submit a water use plan to Crown Mines, including, but not limited to, a description of the diversion and conveyance facilities, the amount of water that it reasonably expects to use, the timing of the proposed use, and a description of the operations that will use the water in its mining and development of the Claims.
Diversion and Use Records . DTMC shall measure its water diversions and keep records of all water diverted, used, and returned under the Water Rights. The water diversion and use records maintained by DTMC shall be considered confidential and shall not be disclosed to anyone but Crown Mines without Crown Mines’ express written permission. On each anniversary of the Effective Date, DTMC shall provide a report of its diversion and use of water under the Water Rights to Crown Mines.
Filing of Change Applications Restricted . DTMC shall not file any permanent or temporary change applications on the Water Rights without the express prior written permission of Crown Mines.
Termination of Lease . Crown Mines may terminate the Lease upon 12 months’ written notice to DTMC if Crown Mines determines, in its sole and absolute discretion but exercising reasonable commercial judgment, that the use of the Water Rights are necessary for the mining and development of its claims or for other uses which may by law be permitted. Termination of the Lease shall have no effect on the perpetual pipeline easement granted by DTMC to Crown Mines herein, which is expressly intended to survive termination of the Lease.
Pipeline Easement . DTMC hereby grants to Crown Mines a perpetual, non-exclusive easement (“Pipeline Easement”) over and across the Claims at any reasonable point to locate, survey a route, construct, entrench, maintain, protect, inspect and operate a surface or an underground pipeline for the transportation of water, together with necessary valves and other appurtenances. The easement hereby granted is a burden on the Claims for the benefit of Crown Mines, which burden shall run with the Claims and shall be binding upon successor owners of the Claims or any portion thereof and constitute an easement in gross in favor of Crown Mines and its successors and assigns. The Pipeline Easement shall be 20 feet in width being 10 feet on each side of the centerline of the pipeline. The use of the Pipeline Easement shall not unreasonably interfere with DTMC’s mining activities on the Claims, and the Pipeline Easement is in addition to